For the UK forest products industry, 2006 came in with more of a whisper than a bang. Markets were subdued in January, but overall the consensus seems to be that trading in the first two months was “not bad”.

Hardly a ringing endorsement, but nothing to be alarmed about either. An early improvement in weather is hoped for, with a mild spring allowing the garden products and fencing markets to kick in and construction projects to pick up – not only newbuild but also repair, refurbishment, extension and DIY projects, which may be small scale in themselves but cumulatively can account for significant volumes of timber and wood products.

Private growers say activity picked up over the first two months but there are concerns that this might not continue as they perceive a slowdown in sawn goods demand. Carcassing markets have see-sawed; and it’s an awkward time of year for fencing as manufacturers – who have built up their stocks of sawn posts, panels and landscaping material – wait for the key sales period up to and over Easter.

Growers and sawmills alike say prospects for the year as a whole are uncertain, largely due to factors outside the control of the industry. Key among these is the sharply rising cost of energy – already reported as a major factor in the decision by St Regis Paper Company to close its Sudbrook plant near Chepstow.

Sudbrook produces fluting for corrugated cardboard and takes in a quarter of a million tonnes of small hardwood roundwood a year. In addition to the impact on employees at the plant, closure will have severe repercussions for hardwood growers and contractors in southern England.

Without an outlet for small roundwood, harvesting of sawlogs could be hampered – and suppliers who have bought forward and contractors who have invested in new harvesting machines on the basis of relying on sales to Sudbrook will face real difficulties.

In addition, St Regis was renowned for paying promptly, providing essential cash flow for growers that helped to fund the longer-term firewood business. It’s difficult to assess the size of the cash-based firewood sector, but it is generally thought to be as large as the St Regis demand. In addition, the market for hardwood underpinned the softwood business from the mixed stands in the south.

Transport routes

Yet another impact will be on transport. The St Regis supply formed one leg of many ‘triangular’ runs for flat bed trailers, and the loss of this will make a difference to the economics of transport on other routes.

Other markets must, and will, be found for the small hardwood. Biofuel could provide an alternative outlet in time, but the prospect of increasing demand for wood in energy generation is not universally welcomed. Panel products manufacturers have been talking about the potential disruption to their wood raw material supply for some time – and the issue is now starting to worry sawmills.

At present supply and demand are delicately balanced but that could easily change. There’s no shortage of standing timber on offer and no reported problems with harvesting, as contractors are all now back from assisting the clear-up operations in Scandinavia last year. However, in Wales and parts of England there are concerns about possible shortages of roundwood for fence posts, stakes and rails, especially of smaller diameters. Stocks of roundwood at fencing manufacturers are tighter than usual for the time of year and companies are having to look further ahead and further afield for supplies.

There’s no clear reason but it’s assumed to be down to price. With modern harvesting equipment, sorting out the sizes and qualities of small material for fencing involves a fair amount of manual work, and unless the return makes this worthwhile it’s easier to put all the small material to chip and pulp markets, where demand and prices are currently reasonable. A ready market for biofuel could exacerbate this.

There are also mutterings that the long-heralded “wall of wood” (referring to the predicted peak in supply of logs from maturing plantations around 2015-2020) might not be quite so large. Some in the industry are suggesting that the original forecast was based more on ‘biological’ rather than ‘economic’ availability, and that there may be more of a plateau than a peak – lasting longer but with a lesser volume – which will mean some reassessment of strategy by timber processors.

Private growers will have a key role to play, and that adds to the difficulty of prediction. While the Forestry Commission has worked to ensure consistent and reliable forecasts and supply, the private sector works to different and largely unknowable rules – if prices aren’t as growers would like they can easily decide to leave the trees standing for another season.

Publication of Forestry Commission and private sector production forecasts – expected in April/May – is therefore keenly awaited.

Merger vote

Meanwhile the industry is digesting the news that the UK Forest Products Association (UKFPA) has decided not to integrate with the Confederation of Forest Industries (ConFor).

ConFor was established in 2004 after an independent review commissioned by the Forest Industries Development Council (FIDC) recommended there should be a single body to represent the industry’s interests. FIDC closed and its activities and staff were taken on by ConFor. The UKFPA, Forestry and Timber Association (FTA), Wood Panel Industries Federation and Forestry Contractors Association agreed to participate in principle – although after discussions the latter two decided against becoming members at that time.

FTA voted to integrate fully with ConFor at its AGM in May 2005, with UKFPA scheduled to decide on the issue during the first quarter of this year. That happened at an extraordinary general meeting on February 15 when the vote went against integration by a narrow majority (26 to 23).

Industry sources say that a number of factors influenced the final outcome. Funding was one of these. ConFor was seeking an annual budget of £1m – the majority of which would come from UKFPA and FTA members through a proposed levy. However, this was not widely supported and a working group set up a few weeks before Christmas developed an alternative based on a mix of levy and subscription. Given the tight timing before the UKFPA meeting, only limited soundings could be taken about the revised plan, but these nonetheless suggested that the proposal was unacceptable to many.

Some UKFPA members were also concerned that a large and unaccountable body was being created in ConFor, over which many companies would have no influence or control – compared with their sense of ownership and involvement in UKFPA.

With these and other concerns making it clear that the vote on integration would be close, several larger mills said they would resign from UKFPA in the event of a ‘no’ vote, and some have already taken this step. Their decision does appear at odds with the idea of a democratic vote. However, feelings on the issue of integration are strongly held and it must be noted that several companies in the other camp had similarly said they would withdraw if integration went ahead.

Since the result, ConFor has produced a newsletter in which chief executive David Crichton reflects on the result and confirms the intention to move forward.

“The vote was a disappointing outcome to what had been a long period of discussion and debate, including a positive postal ballot a few weeks earlier. Nevertheless, it was not entirely unexpected. The different views within the UKFPA membership have been evident for some time, and it was always going to be a close decision. We respect the decision that has now been taken, and we will move forward positively from here.”

ConFor chairman and past president of UKFPA Tony Willis told TTJ: “I would have liked a sizeable ‘yes’ vote and held a number of meetings to try and answer the various questions and concerns. However, I stated right at the start that I did not want to lose a single member in the process of integrating with ConFor. Given that, a small ‘yes’ vote would have been the worst possible result since it could have led many members who do not want change to resign from UKFPA. In the circumstances, despite my own disappointment, the small ‘no’ vote was the better result.”

Importance of co-operation

One thing is clear: everyone in the industry recognises the importance of co-operation among and between the different sectors of the forest products industry. ConFor has confirmed this in its newsletter, and UKFPA’s executive director David Sulman said: “We remain committed to seeking open and co-operative working partnerships with all other organisations involved in the supply of UK or imported wood, as we have done in the nearly 10 years of our existence.

“The resignation of some larger members has freed seats on the executive council for new blood as we now look ahead, with positive support expressed by members for the continuation of the UKFPA as a valued association that does a good job for companies of all sizes.”

At a time when the timber industry is facing challenges and opportunities – not least with the increasing interest in wood and the potential for significantly increasing market share in the construction and other markets – the ability of companies and organisations to put aside their differences and work together will deliver real strength in both representation and marketing.